Whiskey maker Brown-Forman steps up overseas shipment as trade war looms

(Reuters) – Jack Daniel’s maker Brown-Forman Corp (BFb.N) (BFa.N) said it has been trying to mitigate risk of potential retaliatory tariffs from top U.S. trade allies by increasing shipments to some markets overseas in the last few months.

FILE PHOTO – A bottle of Jack Daniel’s Tennessee whiskey is seen on a shelf at the Vin Place wine and liquors store in Beijing, China April 10, 2018. REUTERS/Damir Sagolj

U.S. President Donald Trump last week imposed import duties on metals from the European Union, Canada and Mexico. In retaliation, Mexico slapped a 25 percent levy on bourbon imports, with other trade partners saying they would impose duties on American goods including Jack Daniel’s whiskey.

“It’s a tough, tricky situation that we’ve been watching now for months. It seems like every day we wake up and it takes a little bit of a twist and turn,” outgoing CEO Paul Varga said on a conference call while discussing the company’s fourth-quarter results.

Brown-Forman gets 18 percent of its net sales from the UK, Germany, Poland and France, while Mexico and Canada contribute about 5 percent and 1 percent, respectively.

Shares of the Kentucky-based company fell 5.4 percent to $52.85 in late morning trading.

Varga said the company has gained more flexibility in managing trade risks by moving shipments to markets where it has its own distribution, rather than depending on third-party distributors.

The company which also makes Finlandia vodka said higher wood, agave and freight costs would lead to a modest decline in gross margins in fiscal 2019.

Excluding the impact of any potential tariffs, Brown-Foreman expects earnings per share of $1.75 to $1.85 in fiscal year 2019, with midpoint of the range coming in below the analysts’ forecast of $1.82 per share, according to Thomson Reuters I/B/E/S.

Net income for the company fell to $110 million, or 23 cents per share, in the quarter ended April 30, from $144 million, or 30 cents per share, a year earlier.

Net sales rose 5.6 percent to $733 million. Analysts had expected the company to earn 22 cents per share on revenue of $755.4 million in the quarter.

Reporting by Nivedita Balu and Uday Sampath in Bengaluru; Editing by Arun Koyyur



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